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Pound makes good start to 2012

Wednesday 4th January 2012Good morning. The Pound has started 2012 well, rising against the US Dollar and staying close to a 1 year high against the Euro. This was following better than expected data from the manufacturing sector yesterday. Below shows how rates moved through the first global trading day of the year.

~Currency movements on Tuesday 3rd January 2012~

Pound remains near 1 year high vs Euro

The Pound rose a little yesterday after better than expected global data lifted the markets, and boosted riskier currencies, of which the Pound is one. Better Manufacturing data also gave the Pound a little boost, but analysts said the survey would not alter the view that the UK risks slipping into another recession. Over the fourth quarter as a whole it showed manufacturing recorded its worst performance since the second quarter of 2009.

Many are sceptical that sterling can be considered a safe haven asset like the USD is, and given the fragility of the UK economy and its debt levels, which are still high despite government austerity measures aimed at reducing the country’s deficit, some say that the Pound could drop against the Euro as UK data comes into focus.

There is still no consensus however, with other analysts expecting the Pound to gain further against the Euro, so it’s very hard to know in which direction this cross could take in the coming weeks and months.

So if you need to buy Euros in 2012, what are your options?

The Euro debt crisis has weakened the Euro significantly, and currently rates are very close to the best in a year. While of course you will hope rates go up further, but don’t want to leave yourself exposed to a fall – remember, only a few months ago rates were in the €1.13’s, and a recent Financial Times survey showed economists expect a bleak 2012 which could rival 2009 for economic weakness in Britain as output is hit by the euro zone debt crisis, so there’s lots that could happen to push rates the wrong way.

Many of my clients have therefore chosen to employ ‘Stop Loss’ orders. This is where you can place a lower level below the current exchange rate, and if the exchange rate then drops, your currency is purchased giving you a worst case scenario. In this way you can keep taking advantage of any gains in the rate, while having protection should the market move against you.

Sterling rose against the US Dollar yesterday as pretty good global economic data supported riskier currencies and after a survey showed UK manufacturing activity contracted less than forecast in December. The USD is seen as a safe haven currency, and so when investors are less risk averse when better data comes along, often the Dollar weakens and becomes a little cheaper to buy.Today’s Data

We have quite a bit coming from the UK today, including UK money Supply, Mortgage Approvals, Lending and Construction data. In Europe we have further inflation figures from the EU and Germany. In the USA we see Mortgage approvals and Factory Orders.

If you need to buy or sell foreign currency, click below now to send us an enquiry for free. Our exhange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.